Recommend one (1) internal control that would provide protectionagainst the following threats:a) Making a credit sale to a customer who is already four monthsbehind in making payments on his account.b) Authorising a credit memo for a sales return when the goods werenever actually returned.
Question
Recommend one (1) internal control that would provide protectionagainst the following threats:a) Making a credit sale to a customer who is already four monthsbehind in making payments on his account.b) Authorising a credit memo for a sales return when the goods werenever actually returned.
Solution
a) Credit Check Control: Before making a credit sale, the company should have a system in place to check the credit history of the customer. This control will help the company to identify customers who are already behind in making payments. If a customer is found to be four months behind in making payments, the system should flag this and prevent further credit sales to this customer until the outstanding payments are cleared.
b) Verification Control: To prevent unauthorized credit memos for sales returns, the company should have a verification control in place. This means that before a credit memo is authorized, there should be a physical verification of the returned goods. The credit memo should only be authorized if the goods have been physically returned and are in satisfactory condition. This control will prevent fraudulent credit memos and protect the company's assets.
Similar Questions
Authorizing a credit sale is an example ofSelect one:a.preventive controlb.corrective controlc.accounting controld.detective control
Four techniques of internal control1. Basic controlWhere simple steps are taken to protect assets, insure valuables and items against theft, for example maintaining records of sales and express, whether or not one item is known to another. not only protect from inside but also from outside2. Supervisory controlMake sure the employee is doing the job right, give them regular performance reviews, train them and supervise them.3. Internal CheckIt is the regular checking that is known during the work to catch fraud e.g sale record and cash register are compared. And then cross-checking will find out whether it is a fraud or an error. It is for some department it is towards different activity to check error internal control is a broad term4.Internal audit
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